Republican Thoughts on the Filibuster

The Takeaway

The investment community is increasingly coming to understand the restrictions inherent in the budget reconciliation process in Congress, and investors are looking to uncover the other maneuvers available to the slim Republican majority in the United States Senate. Presidentelect Trump made tremendous promises over the course of his campaign. While much can be done via Executive Order and reconciliation, the reality is that comprehensive legislation on myriad issues requires regular order – that is the only path forward for such legislation to pass through the House and Senate. Bipartisan legislation is one option but circumventing that process by rewriting the rules of the Senate is a possibility that we discuss in this report.


In 2013, then-Senate Majority Leader Harry Reid (D-NV) made alterations to the rules of the United States Senate that would have approved, with only 51 votes, executive branch nominees and judicial nominees with the exception of Supreme Court justice appointments. This change, commonly referred to as the “nuclear option,” was profoundly upsetting to the minority party at the time and was done only after extended obstructionism from the minority party. Nonetheless, Reid’s move set a precedent for altering the filibuster in the Senate in the future. As the 115th Congress convenes in January 2017, there will be another opportunity for Senate Majority Leader Mitch McConnell (R-KY) to consider adjusting the rules for the Senate.

At this point, we are inclined to believe what former House Majority Leader Eric Cantor (R-VA) implied on November 10: the Senate will consider expanding the use of the nuclear option for consideration of Supreme Court justices. Appointing a conservative to the U.S. Supreme Court has been a pillar of the Trump campaign and, if he carries through with such a nomination, such a conservative candidate will most certainly not attract the necessary eight Democratic votes needed to pass via regular order in the Senate. Given how the Republicans obstructed President Obama from appointing a Supreme Court justice for nearly a year, it is highly unlikely that Democrats would cater to Republicans’ request to appoint a conservative Justice in January. As such, the two options for Trump are to either appoint a moderate justice or ask Majority Leader McConnell to trigger the nuclear option for Supreme Court justice confirmations.

We belabor the Supreme Court issue to illustrate just how momentous an occasion it would be for the Senate to override the filibuster for even the high court nominations. Senators hold their chamber in high esteem in part because of the tremendous power of the minority which, in their own words, is what prevents them from being as unruly and reactionary as the House of Representatives. Overriding that minority power is not only something that history suggests they would ultimately come to regret but also it would fundamentally recast the nature of the legislative body. Based on that understanding, our own experiences in the Senate, and recent discussions with Senate staff in the Republican caucus, we do not expect the majority to change filibuster rules to create a 51-vote threshold for legislation in 2017. As such, except for the few pieces of legislation that can pass via reconciliation in any given fiscal year (one spending bill, one deficit-increasing bill, and one debt ceiling bill), we do not expect other partisan legislation to pass. Instead, Trump and Republican leaders will have to identify eight additional votes from the Democratic Party, continuing the longstanding tradition of deliberation and the power of the minority in the Senate.


RISKS

The legislative and regulatory agendas are subject to change at the discretion of leadership. Unprecedented economic conditions could instigate unanticipated and/or sweeping shifts in policy. Predicting the future is a hazardous endeavor and economic / market forecasting is an imprecise science. Actual outcomes may differ substantially from our forecasts. The predictions and opinions expressed herein are subject to change at any time.

ANALYST CERTIFICATION

I, Henrietta Treyz, certify that (i) the recommendations and opinions expressed in this research commentary accurately reflect the research analyst’s personal views about any and all of the subject securities or issuers discussed herein and (ii) no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the research analyst in the research commentary.

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